Report Shows Significant Increase in Mergers and Acquisitions for Community Oncology Practices

September 2020, Vol 10, No 9

The 2020 Community Oncology Alliance (COA) Practice Impact report shows that over the past 12 years, there has been an alarming 20.8% increase in community oncology practices merging with hospitals or being acquired by a corporate entity. Since the last COA report issued in 2008, 1748 community oncology clinics and/or practices have been acquired by hospitals, merged with other practices, or reported financial struggles.

Breaking the data down by impact on individual practices indicates the following:

  • 435 individual clinics have closed
  • 348 oncology practices are experiencing financial struggles
  • 40 practices are sending Medicare patients elsewhere for chemotherapy
  • 722 practices have been acquired by hospitals or have entered a contractual arrangement binding them to a hospital
  • 203 practices have merged with another community oncology practice and/or acquired by a corporate entity.

What Are the Main Contributing Factors?

“Primarily, what’s happening is that practices have been acquired by hospitals. The main reason for this trend are the pressures that community oncology practices face from Medicare and from the consolidating [pharmacy benefit managers] PBM/insurer complex and the roadblocks regarding realistic and adequate reimbursement,” said Ted Okon, MBA, Executive Director of COA.

“To meet these roadblocks, community oncology practices have had to hire more personnel to work through the prior authorization process, which slows down the process of costs for the insurer, and makes it dramatically more difficult to treat patients,” he continued.

“Hospitals have a financial incentive for cancer care because of the 340B discounts they receive, and they are doing everything they can to put pressure on independent practices to merge. Many community oncology practices do not want to merge with the hospitals, so their other avenue is to merge with other practices,” Mr Okon explained.

Implications of the Current Trend

Although there are financial incentives for hospitals and corporations to encourage mergers with community oncology practices, this actually increases the costs of care for patients and payers.

“There is clear documentation that when physicians merge with hospital systems, the costs increase. Studies show that consolidation in healthcare does not increase the quality of care, but it does increase the costs for patients and payers (including unions and employers if the patient is insured),” Mr Okon said.

Impact of the COVID-19 Pandemic

The 2020 COA Practice Impact Report cites early data suggesting that the COVID-19 pandemic is significantly impacting community oncology practices by reducing the number of visits, treatments, and the number of new patients seeking care. It is unclear whether hospitals will use unrestricted bailouts to fuel growth post-pandemic by pressuring further acquisitions onto community oncology practices.

“Right now, independent community oncology practices are holding their own. If it were not for them, we would have a lot of suffering patients with cancer. Big healthcare systems have been overrun with COVID-19 patients, understandably, and in many cases, redeployed oncologists to care for patients severely affected by the virus,” Mr Okon said.

To effectively treat patients with cancer in the community setting, practices must keep their facilities and their staff COVID-19-free. This leads to higher costs and more stress for these practices.

The COVID-19 health crisis has also caused a lag in new cancer diagnoses. A recent report suggests that there will be approximately 10,000 more deaths from breast and colorectal cancers because of the reduced access to mammograms and colonoscopy screenings during the pandemic.

“These problems, especially when mammography or colonoscopy is tied to the hospital system, will have repercussions. Patients will get diagnosed at a later stage, be sicker, and require more intensive care,” Mr Okon said.

Steps to Reverse the Current Trend

The only way to reverse this current trend is for community practices and oncologists to break their contractual arrangements with hospitals and/or corporations.

“We are seeing some indications that practices and physicians are breaking free and coming out of the hospital. Obviously, there are legal contractual considerations, and clinicians must locate a practice and have the necessary equipment,” Mr Okon noted.

“The biggest hurdle [to breaking the contract with the hospital] is that unlike an internist, an oncologist cannot just set up a shingle. You need to have sophisticated equipment, such as imaging, on site. There are impediments to breaking away,” he added.

Some insurers are taking steps to alert their insured patients to the increased cost of cancer care delivered in a hospital setting as opposed to in an independent practice setting.

“UnitedHealthcare has recently informed patients with cancer that their cost of care may be less in a physician’s office than in a hospital,” Mr Okon said.

The complete 2020 Community Oncology Practice Impact Report is available online.

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